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tv   Closing Bell With Maria Bartiromo  CNBC  October 25, 2012 4:00pm-5:00pm EDT

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we get ready now. two very important earnings reports. amazon and apple set to report. they'll definitely set the tone for tomorrow. you'll get it coming up with maria bartiromo and the second hour of the "closing bell." see you tomorrow. and it is 4:00 on wall street. do you know where your money is? hi, everybody. welcome back to the "closing bell." i'm maria bartiromo on the floor of the new york stock exchange. the major averages staging a late day rally today. take a look at how we're settling out on this thursday afternoon. the buying coming in just in the last 20 minutes of trading sending the industrial average up to 13,104, a fractional decline there. 27 points higher, about a quarter of a percent. nasdaq also higher, reversing early losses. and the s&p 500 tonight also up four points. a third of a percent at 1413. investors now waiting on a pair of big earnings news that are coming out. apple due out in about a half hour. amazon's earnings could be
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released any moment right now. $13.81 billion in revenue is the number for amazon for the quarter. just coming out right now as we speak. the expectations for earnings actually calls for a loss of 8 cents a share. looking at the report and coming up with the e pps number. the revenue looks a little short. there you see the stock trading lower in the extended hours on the heels of these numbers. of course, the numbers literally just hitting the tape. so we've got a light situation here. it looks like. we bring in dan morgan who owns amazon stock. good to see you. you have the revenue number. $13.81 billion looks lying versus the expectation. what's your thought? >> initially, that revenue
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number is not good. we knew this would give us an idea of what to expect in terms of the overall health of retail spending and give us an indication of what might come down in terms of the upcoming holiday spending. i want to focus on those margins and see how those come out if we get more information. initially, it doesn't look good with that revenue number. >> you say amazon's numbers can give us a good sense of the health of the online retail sector. obviously this is the monster online in terms of retail. what's your perception of how business is going from that standpoint? >> well i think it's going relatively well. i'm kind of worried about them having to pay state sales tax. we know in california they're going to have to start doing that. that may take away some of the advantage that they have over some of the brick and mortar stores. this will be interesting to see how that plays out. initially, i think things are beginning okay. obviously, this revenue is not good. we're expe
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>> we're expecting a loss for the quarter. it feels like amazon doesn't care about profitable. it's just churning out profitability and every quarter it's growing revenue strongly up until this quarter. is that a fair statement? we want to really go through this number, make sure this is apples to apples. what i'm getting here, dan, is a loss of 23 cents a share. it was expected to be a loss of 8 cents a share. we're going to look at this and make sure it's apples to apples. 23 cent loss is pretty bad, don't you think? >> yeah, that doesn't sound good. there could be one-time items in there. massive buildout in terms of their distribution centers and fulfillment centers. we know that's been impacting margins, as i mentioned before. there could be some one-time items in there they took during
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this quarter to put some -- >> well, this is x items. >> doesn't look good, maria. obviously want to get more information. >> so what is going drive growth at amazon for the coming quarters? i'm always reluctant to look at one quarter and believe that's the story. but this stock has done well. this company has been growing revenue strongly for several quarters. now it looks like it's hitting a wall. where does the growth come from in the coming year? >> well, i think you've got to look at some of their international expanse -- expansion in brazil and india. also, they have some new products coming out. they just introduced the new kindle fire tablets. that will go against the dominance of apple in terms of ipad. i think they're putting a lot on that. then, also like i mentioned before, this massive buildout of these distribution centers.
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in terms of increasing intense of their customers, so they can be more specific in terms of marketing. i think those are kind of some of their growth airs ya they're focused on going forward. >> living social could be part of the issue here. in terms of acquisitions or divestitures, what would your expectation be for this company's strategy? >> well, acquisitions could be a major part in terms of continuing to grow that revenue number over and over and not spending as much on the bottom line. of course, with acquisitions you have charges and one-time items and so forth. that could be another way to drive the upper line in terms of revenues. as you said before, it seems that is their strategy to push that upper line. >> let's broaden this out. dan, stay right there. we want to keep you here looking at amazon as we continue to get more details. gary schilling joins us along with ben pace and jeff cox. good to see you, guys. thanks for joining us.
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gary, let me get your take in terms of the earnings period. how would you characterize things? >> well, i think they're weak, but it's not unexpected, at least not to us. we've been talking about having $80 on s&p 500 operating earnings over a 12-month stretch. maybe it's starting as of the third quarter. you got three things that are affecting profits. this is really outside of the special tech problems that affected google, microsoft, and now amazon. one is translation losses with a stronger dollar. the second one is margins. american businesses have done a bang-up job of cutting costs. they seemed to have hit the wall. they picked the low-hanging fruit. the third thing is global slowdown. if not recession. that means less revenues. so you've really got a triple whammy. >> triple whammy, ben, is what we're seeing across the board here in the third quarter numbers. yet, it really does appear like technology is being hit hardest.
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what's your take? >> well, yeah, i think you do have technology, but in a way it's in its own world. by the same token, there are a lot of gadgets there. amazon is a lot of retailing. google, the usage, microsoft, you have the phasing out of the pc. you have specialty factors. they're ultimately affected by the economy. >> what do you think, ben pace? >> yeah, i think, maria, that the technology space was really impacted by the slowdown and world economic growth that we saw in the summertime. there's some beacons of silver lining in the clouds as far as the earnings go. i think the housing market's starting to pick up. consumer spending has been okay. you have seen reasonably good earnings in the health care space, in the consumer space. we're thinking this is a bit of a slowdown. this might be the worst we see. fourth quarter should be a little better. 2013 we do expect positive gdp
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fwroet in the 2% range. we don't think oempting earnings come down to the extent that gary just put forth, but they're probably a little too high right now and probably mid to single digit grow into 2013. >> we're getting the guidance now from amazon, dan morgan. the company is talking about this loss of 23 cents as well as revenue of $13.81 billion. we're getting the guidance as well for the next quarter. let me get your take on what may have gone wrong here. did we see a real slowdown in spending? is this a reflection of the global economy slowing down? what you mentioned earlier, that is the game changer in terms of the income tax story. >> well t could be that income tax issue. that's a big issue. again, it kind of takes away that competitive advantage they had. it's kind of hard, onbviously, just getting a couple numbers to
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dry to draw a mosaic of what's happening. we know economic growth isn't that great. we know the unemployment rate is still pretty high. there's still some things out there. it just seemed like we had indications earlier that retail sales were doing relatively well. for me, this is a bit of a surprise that we wouldn't see some follow through in terms of amazon. kind of surprising they had such a huge loss and a miss on the top line. >> you own the stock. would you sell it here on the heels of something changing? >> well, maria, it's on our buy list. it trades about 67 times earnings versus the upcoming estimate for this year. the average is about 50 times earnings. it's a little overvalued. for clients that it makes sense from a risk objective perspective, it might be something we look at. it's still on our list at this time. i think we need to dissect these numbers more and dig through them and try to understand exactly what happened in this quarter. >> you know, maria -- >> jeff cox? >> yeah, maria, this story, it
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all fits into a larger narrative. what i've been doing in my reporting is just three simple words. follow the money. there's a couple different places where it's going. three points. first of all, demand is dead. i think that's what you're hearing over and over from ceos. it's reflected in october earnings. only up 0.9%. it's been a big drop off. second thing i'm seeing, where's the money going? it's going to the sidelines. i'm watching cash on the sidelines. those money market funds that we look at to see where the dead money is, $2.57 trillion. that's been on a steady uprise since july. if you look at stock funds, they lost $15.5 billion in october so far. bond funds gained $28 billion. so the third point i want to make here, i'm calling this the election earnings trade. we have talked before about the market pricing and a romney victory. i think no market is priced more aggressively than the commodities market. i have a chart i'd love to pull
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up now. if you follow president obama's numbers on trade and overlay with the goldman sachs commodity, the fortunes are almost the exact same chart. the market's worried that if romney gets elected, all this money printing, the quantitative easing, that stuff might be over. it could be bad news for the commodity trade. >> all right. we'll leave it there. thanks, everybody. really appreciate it. we'll keep watching this market, which ended high we are a late burst of buying. we have breaking news on decker's outdoor. >> maria, this is what i like to call a who knew what when story. if you look at deckers right before the close, the stock took a really big hit. down quite a bit in the 30 minutes before the market closed. company came out with results. they were okay. it's the guidance that counts. you've got to listen to these numbers. the company now says sales in 2012 would increase by 5%. that's compared with its earlier guidance of 14%.
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eps will be down 33%. earlier guidance, down 9%. so it will be interesting to see how this trades. it's an interesting story we'll keep watching. back to you. >> all right, herb. thank you so much. take a short break, don't go away. we have a lot more ahead on this busy edition of the "closing bell." coming up, stepping on the gas. lowe's jim tish talks exclusively to maria about falling oil and natural gas prices and what that means for our economy and your wallet. plus, all about apple. we are all over the tech giant's earnings with top analysts to i did seblgt the numbers and big shareholders to tell you if they're buying or selling now. that's all ahead on the "closing bell."
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welcome back. my next guest says the u.s. can address both economic and energy issues by exporting natural gas. jim tish is president and ceo of lowe's corporation. he's also the former director of the federal reserve bank in new york. jim, always great to see you. thanks so much for joining me tonight. >> good to be with w you, maria. >> i want to ask you, we've been talking about the fiscal cliff and how 80 ceos got together to
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send a letter to send it to congress to say, we need to act urgently in terms of cutting america's debt. would you be poised to sign that? are you aware that this has become a real urgent story for corporate america? how do you feel about it? >> i signed the letter, maria. so, yes, i think that the debt level of the united states government is a major problem and want fiscal cliff is a major problem and it has to be dealt with very quickly by the politicians in washington. >> i mean, it is extraordinary it's business once again raising the red flag, and we're still waiting on our so-called leadership to do anything about this. >> well, what's happened, in my mind, is that the american businesses balance sheets are in very good shape. the american consumer has improved his balance sheet dramatically in the past four years, but it's the government's sector that has not improved their balance sheet in any way nor improved their spending
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habits. i think that the market is waiting to see the government get its spending in order and waiting to see what's going to happen with taxing and spending before businesses are going to go out and really feel good about making investments. >> unbelievable. so one area that you believe can really provide a boost to this economy, of course, is energy. you're red hot on natural gas. tell us about it. >> so, there's a natural gas boom that's going on, and, in fact, it's nothing new. this has been going on for several years now. in the past five years, natural gas consumption is up probably 3% to 5% a year while oil consumption is down over the past four to five years. so we're seeing a major shift away from oil and towards natural gas. and the reason is very simple. because a btu of natural gas
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costs about 1/4 of what a btu of oil costs. as i like to describe it, natural gas is btus on the cheek. >> why do you think that's not part of our energy policy then? if we are so rich in natural gas in this country, why aren't we a gas exporter? >> listen, maria, i think we should be a natural gas exporter. i think we will be a natural gas exporter. i think the problem is that for a long time, until about three years ago, natural gas was a commodity that was in shortage. it was always in tight supply. in fact, in '08, we had natural gas trade at $15 per mcf. it's now less than 25% of that. so because of hydraulic fracking, because of horizontal drilling, we've moved in the past five to ten years from natural gas being a scarce resource to it being an abundant
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resource. what we know today is that the united states has well over 100 years of supply that can be accessed by current technology and methodologies. >> really interesting. it can transform this economy. >> it can transform this economy. it will transform this economy. and it will also mean very significant job growth. my back of the envelope calculation is that for every additional billion cubic feet of natural gas reproduce, and right know we produce 65 billion cubic feet a day, so for every additional billion cubic feet of natural gas we produce a day, that's good for 7,000 to 10,000 jobs. daniel jurgen did a much more in-depth calculation and came up with 40,000 jobs a day for every additional billion cubic feet of natural gas we produce. so natural gas is a real job
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creator if the government will just allow it to be, number one, consumed, and number two, allow it to be exported. >> i guess one of the issues is the environmentalists are complaining. do you have any concerns over environmental issues resulting from natural gas production? >> so the main issue with respect to environmentalists and natural gas is fracking. fracking is something that has been done for the past 60 years in the united states. when done properly, it is perfectly safe. the keyword with here is properly. there's no doubt in my mind that there should be efforts made by not only companies but also by government to assure the public that gas -- that fracking is done properly. >> well, here we are a couple of, what, 12 days away from the election, jim. i guess for business it's all about the election. how do you think this plays out?
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>> listen, it's a close race. i think there are two very clear choices for the -- >> yeah, different choices. >> absolutely. and listen, it's an election that's been going on now for the past two years. i'll be happy when it's over. >> amen to that. thanks so much, jim. good to have you on the program as always . we appreciate it. >> good to be with you. >> see you soon. we want to get to seema mody. expedia spiking on earnings tonight. >> that's right, maria. expedia's numbers are out. a slight beat on its top line. its eps coming in line with expectations at $1.26 a share. another point to note, worldwide hotel revenue jumping 20% year over year. the stock spiking after hours. back to you. >> all right, seema. thank you so much. up next, outspendsing the millionaire. turns out the obama team has spent more money that is romney this election season. but both figures are eye
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popping. our eamon javers with the latest details. then countdown to apple o's earnings due out minutes from now. we have full-team analysis. you won't want to miss a moment. back in a moment. i'll have more awkward conversations than i'm equipped for because i'm raising two girls on my own. i'll worry about the economy more than a few times before they're grown. but it's for them, so i've found a way. who matters most to you says the most about you. massmutual is owned by our policyholders so they matter most to us. massmutual. we'll help you get there. at optionsxpress we're all about options trading.
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the narrative for this campaign season has made it seem line mitt romney and the republicans are outspending president obama and the democrats. that's actually not the case, though. eamon javers with the story. over to you, eamon. >> hi, maria. the battle for a four-year stay at the white house has an enormous price tag. the candidates' campaigns, the committees that support them, and the top three super pacs on each side. here's how it breaks down. the obama campaign burnt through $470 million. another $255 million came from the democratic national committee. the top three pro-obama super pacs dumped in another $53.7 million. team obama comes in with over $779 million in spending. follow me over here to the challenger's side. you see that the romney campaign spent over $298 million.
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the republican national committee peopled on another $249 million. the top three pro-romney super pacs added a whopping $156.5 million. again, according to the center for responsive politics. total spent, more than $700 million. so far, team obama manages to outspend the romney camp by more than $75 million. keep in mind, this doesn't include all of the spending still going on in october, a key month in any election year. that's going to push through to election night. there's going to be a lot more spending still to come. these are the numbers as we're looking at it so far. >> wow. big numbers there. thanks so much, eamon. up next, the drum beat gets louder ahead of apple's results due out minutes from now. we'll bring you the report the second they hit the street along with instant analysis. stay with us. americans are always ready to work hard for a better future.
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welcome back. we are seconds away from apple's earnings. the expectations call for a profit in the fourth quarter of $8.75 a share on revenue of $35.8 billion. this is apple's fourth quarter. john fort is breaking down those numbers as soon as they come in. first, we want to bring our tech
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experts in for a preview. good see everybody. thanks for joining us. gene, how worried are you about slowing sales of the ipad and what we've been seeing in technology already? does that translate into apple's story as well? >> we're worried enough we lowered our numbers a couple days ago on the ipad. they gave us that 15 million number. i think a lot of that was probably related to some of the slowdown anticipation in the new ipad. we'll see what some of their commentary is on the call. we have some temperate expectations going into tonight's numbers. >> yeah, we certainly have been seeing that across the board within tech. shaw, what's your take? what are you expectationing in terms of apple managing supply constraints for the iphone 5? >> that's really the key question, maria. in terms of how many were they actually able to build. >> it's apple. i don't want to interrupt you. they called for a revenue number
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of $35.8 billion. we're getting $35.97 billion for the fourth quarter in revenue. the earnings are lower than the expectation. 876 is the earnings versus an estimate of 875. what's your take, shaw? >> this is somewhat expected. everyone expected a miss. it looks like we're going to have to dissect the numbers, but it looks like obviously ipad is a little light. looks like they weren't able to build enough iphone 5s. >> so iphone 5 was the issue. we know they did have an inventory issue there. john fort, what can you tell us about this quarter? we've got the headline numbers of 876 on $35.97 billion in sales. >> let's look at some of the products. apple sold 26.9 million iphones. not bad in terms of a raw number. the ipads, though, short of even where a few people who took down their numbers went. 14 million ipads where some
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folks -- i know, gene, you were at 18.5. i suspect they were drawing down some inventor toirs, perhaps, ahead of this fourth generation ipad. 4.9 million macs. 5.93 million ipods. of course, they talk about the dividend here as well. they generated quite a bit of cash, which we can calculate out in a bit. those are the product numbers. >> all right. the product numbers -- the expectations going into the quarter, we were taking those numbers down on the ipad and the iphone, right, gene? that's what you did as well. do you expect a recovery next quarter in that? >> we would. i think the critical number there is that iphone number. i think i heard 26.9. i think that's what john said. that's a pretty impressive number given what they had on the iphone 5 supply. that basically means people are still buying iphones ahead of the iphone 5. obviously, the ipad was disappointing. that was largely expected. i think that there's some
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positive takeaways in terms of despite all the supply issues, they're able to deal a better number. looking for 25 million iphones. a critical point about that iphone number is that the real number, the actual number that is actually better, the sell through number, the reason is that apple drew down channel inventory in the quarter. we're going to get some feedback on the call in terms of what that could be, but that could add potentially up to a couple million units to that number in terms of the sell through. it's actually in terms of the iphone despite the supply issues. i think the narrative tomorrow is going to be despite the supply issues they're able to still deal a decent iphone quarter there. >> and they're predicting first quarter earnings at 1175 versus 15.43. so they also are taking the first quarter lower. i guess, shaw, my question is, is this a global slowdown story that we're seeing in apple as well as the inventory issues, or is this just a specific story where they could not, you know, meet the demand on the iphone 5
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and they had, you know, expectations that the ipad would sort of start stabilizing and demand would slow down tlrks or is this what we're seeing in all other technology companies? that is bottom line, slowdown, lower demand. these are two different stories. >> yeah, i actually think this is more of a supply issue. they did a pretty big iphone number close to 27 million. it looks like this pause, you know, ahead of the ipad mini was bigger than expected. so we think it's mostly that. it kind of reminds us of the previous quarter where they came in light on iphone. it turned out to be a pause thing, people waiting for the new product. we think apple is still pretty much teflon versus most of the other companies out there. >> you know, we're looking at the stock here. it traded up immediately after. then it was halted. john fort, is this typical? do we normally see apple shares get halted on an announcement like this? >> it's not uncommon to see them
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halted right before the numbers come out. it's a little odd for them to still be halted a couple minutes later. if it's still halted five, ten minutes from now, i'd say that's really weird. at this point, not sure i'm willing to call it that weird. i would echo what the guys were saying thus far. something i'm noticing, the iphone number pretty strong. the ipad number, again, drawing down channel inventory of the third generation ipad because they don't want to sell those anymore. so all of those that their might have had ready to ship and might have otherwise been ready to ship, they're trying to clear out. that's the sense i got from what apple was saying earlier this week. overall, the mac seems strong. i'm looking at how it performed, even in europe. mac units seem to do well. revenue-wise, down just 3% year over year from what i can see here. so -- sorry, that's sequentially down 3%. you know, even in europe, which
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has been having trouble for them, they seem to be holding steady in that business. >> we know apple is such an enormous part of all the inde s indexes. almost 20% of the nasdaq 100. 5% of the s&p 500. we have the cues down as an indication, apparently that, the market trades down tomorrow, likely on the apple story. is that what you would expect, gene? >> you know, i would expect a first read. i always want more. i think john brought up an important point about the ipad number with some of the channel draw down into the new ipad launch. something else, that iphone number near 27 million is a surprise. that's better than what people thought. the number is going to be better when you factor in the channel change. when we do survey work around this, the interest level in buying an iphone has gone up. in the u.s., 55% of people who said they're going to buy a
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phone in the next three months say it's going to be an iphone. just before the iphone was announced, that number was 48. there's a lot of demand out there. this is a supply issue. i understand the numbers aren't the fireworks apple typically puts. despite all the head winds, they seem to be doing okay. >> so what do you wanted to here, shaw? you want to take some money off the table on apple? would you buy the stock here or sell it? >> we're a buyer here. we got two really big product cycles coming up. we have iphone 5 that's going on right now. we just got ipad mini getting started. we think these two products are going to sell phenomenally well. >> okay. we're probably going to see some damage here on the stock. it's halted. is that a typical situation that the shares would be with halted from your standpoint? >> well, we're not too worried about that. the stock's going to do what it's going to do. keep in mind, it sold off also last quarter. that ended up being a big buying opportunity. we think we're going see something similar here. >> maria? >> yes.
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>> something i want to toss in here, i'm just getting this in from julia boorstin, who, of course, covers media and entertainment for us. on this apple story about a potential streaming music service, she says that her sources say that the labels are continuing to be in talks with apple about that. their sense is that apple hopes to launch an ad-supported streaming music service in 2013, but based on the state of talks, it's unlikely to happen at very beginning of the year. >> all right. we will leave it there. we'll take a short break. we've got more apple news coming next. apple shares still halted after the company's earnings. we're going to watch this story. we'll have the latest reaction from a couple of big apple stake holders after the break. stick around. he loves risk. but whether he's climbing everest, scuba diving the great barrier reef with sharks, or jumping into the market, he goes with people he trusts, which is why he trades with a company that doesn't nickel and dime him with hidden fees.
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welcome back. apple's earnings out just moments ago. revenue of $39.75 billion versus an estimate of $35.8 billion. we break down the stock now with managers who own the stock. dan morgan owns about 92,000 shares. plus, we bring in technology analyst gene muenster of piper jaffr jaffray. guys, thanks for spending the time. david, would you be adding to your position or holding off? >> no, it's a buy. it is the only company we own where the problem is they can't make enough of a product the
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people want. it's really the iphone that matters. the iphone 5 is the highest margin product. by not making enough of them, they missed on the bottom line a little bit. we're going to have to wait until the conference call to really understand what the product wrap-up is in manufacturing for the next quarter, which is probably what the guidance is all about. so, you know, apple makes a ton of money. you can compare them to amazon, which had $14 billion of revenue and lost money. so this is one of the great companies that's growing 20% even now, making a lot of money, and their big problem is they can't make enough phones. >> in terms of nothing knot being able to make enough phones and the manufacturing issues, how much of that is due to what's going on at foxconn, the acrimony, protesting. did that play into this, you think? >> it's hard to speculate, but every new iphone is a technological tour of force. it takes a while to get the bugs out. this one had a very new touch
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screen technology, and it is in a way almost hand assembled at foxconn plants. so clearly if there were work stoppages that, would matter. some of it was also getting the right supplies of the new touch screen and being able to manufacture it efficiently. we know apple is moving to robotic assembly. so overtime, these things will be less of a problem. >> dan, what about you? apple recently saw the pullback in the stock. what's going to propel it back? do you think it ever goes back to the all-time highs when the iphone 5 was launched a month ago? >> yeah, i think that and, you know, the ipad mini, too. we haven't talked a lot about that. that kind of $300 price tag. that's going to really heat up things against some of the kindle fire, amazon products. also, microsoft has a new surface tablet coming out. they definitely have new legs on these current product categories. what's interesting f you look at growth rates, we know mac is
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relatively benign. we know ipod is relatively benign. they still have these two key products they continue to add on. the bigger question two, three years down the road with apple is what's next? is it tv? what are they going to do next to keep this propelling tremendous growth they've experienced? in the near term, i think we have enough of a catalyst here with those two new product introduction extensions. >> gene, what about microsoft windows 8? could this open the architecture to be positive, or does it threaten apple's ipod growth? >> you know, whenever you have microsoft, you have to think about it as competition. i think based on what i'm hearing from windows 8, it's a joke. ultimately, i think they try to do two things. try to put a tablet and pc together. they got something people aren't going to want. i think apple basically got a free two-year pass to run the table here in the tablet market because i think surface is joust going to go sideways. >> all right. we will leave it there, take a
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short break, and come back. we want to be here when the stock resumes trading. we're expecting that to be in about six minutes. the apple shares still halted. we're continue following the story and have this ensuing fallout after the break. stay with us.
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so there you see apple. the stock was up 3.75% today. after the close, it was halted. it's going to resume trading at 4:50. that's in about a minute and a half. so once it resumes trading, we'll tell you what it does. already we know the cues are down. apple represents 19 to almost 20% of the nasdaq 100. it represents 5% of the s&p 500. so bottom line, as apple goes, so goes the market. the cues are already down in the extended hours. we're going to see a decline tomorrow if apple opens down big. that's going to certainly set the tone for the whole market. back with me once again is david pearl, dan morgan, and
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technology analyst gene muenster of piper jaffray and stern woo also with me. let me get your take, gene we were just making the point this stock has been on an incredible run in 2012. breaking through, what, 550, then 600, then $700. you're talking about a three-month period. wouldn't it be time for some pullback? there wasn't a lot of room for error here. >> you know what? given the fact all this anticipation for the iphone -- this is the real takeaway. 27 million iphones. who in their right mind would have bought an iphone in the september quarter? you have to be totally out of the loop to do that. they still sold 27 million. so i think at the end of the day, the story is very much intact. the opportunity in smart phones is still large over the next couple years, and i bet you're going see a massive ramp again in these numbers. so i realize the stock may open up down, but that's missing the
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point. this is a great opportunity. >> so you think -- let's say hypothetically it breaks 600. is that an important psychological level, that if it breaks 600, it tells us it's going lower from there? >> i'm not a technical analyst, but from a fundamental side, there's a ton of demand for the iphone and the numbers are going to rebound here. if it's down, i would buy it. i think it's pretty straightforward. you need to own it when people don't like it. this may be the opportunity. everything we have in our survey work of 1,000 people still show increasing interest in the iphone. they just can't get them. i think this is going to rebounds. >> well, you know, if you want to own it when nobody likes it or when people don't like it, maybe that's the time right now. the stock has resumed trading, as we expected. it has broken 600. we're now at $595 on apple with a decline of more than 2% from the close in new york today.
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>> well, like he was saying, i guess they're setting themselves up to prepare for that upcoming quarter for the holiday. so we would expect things to go pretty well. it's a little bad that we saw amazon come in with some numbers earlier that weren't so good as a retail indicator, so to speak, but everything out there seems to be the demand is very strong for these products. so i would expect apple to do very well next quarter with these two new product introductions. >> david, what about you? thoughts on the quarter, the next quarter. we already know that they're lowering guidance for the next quarter. does that tell you anything in terms of what we might expect in terms of the products? >> yes. ironically, if they sell a lot more ipads and the ipad mini, those are lower-margin products. so that would bring the mix shift down and account for some
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of the lower earnings in the guidance. if they really thought that ipads were going to grow faster even than the iphone. so really it's a question of which sells more and faster over the next quarter of the ipad versus the iphone. and you've got to remember, this stock right now is below a market multiple. ex cash it's below ten times earnings. and they're making a ton of money. as was just said, they have over $100 billion in cash. so it's a very inexpensive stock that's still growing in the high double digits. so again, as long as you believe the major story's intact, that the iphone is going to be successful, the ipad mini going to gain share incrementally in a market they weren't in before, you've got to own it. >> maria? >> yeah. go ahead. yes. >> something i would point out in terms of margins and eps heading into next quarter, you've got to remember, when apple ramps up production of a new product, that's always
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expensive up front. they take a hit on margins up front. also ipods tend to be lower margin. and they just refreshed those. it's another one of those products that they just refreshed in the last few weeks. they didn't refresh them a year ago. so you refresh the ipods right before the ipod's biggest quarter. the ipads before that same quarter. and the iphone and when you refresh the iphone you've got manufacturing costs as you ramp that. that's a lot of costs they've got to deal with up front. you expect to see margins take a hit in that kind of situation. >> that's a great point p what about the ipad mini? how important is that to the overall story here? >> well, i think it's extremely important because something that a lot of apple watchers and i think some people in apple might be trying to figure out is exactly what is the ipad line? is it going to cannibalize the pc market? do people see it as a full-fledged computing replacement? is it going to follow more of the ipod annual cycle of being really popular in the holidays and then falling off during the
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year or is it going to be more like the iphone staying popular? that's something we won't know until we're a few more quarters in, especially with this new ipad mini product. >> real quick, from the shareholders in the group david and dan, are you expecting an increase in the dividend? talk to me about that 100 billion in cash on the balance sheet and what they're going to do with it. how do you allocate that money? >> well, i certainly hope so. they finally have relented and are starting a dividend. they picked a rather low yield. so they have plenty of room for up side. the cash flow generation's been there for years so they can afford to up the payout. >> we'll leave it there, gentlemen. thank you very much. great conversation. we appreciate you handicapping the apple numbers for us. and as you can see, the stock right now off of the lows. down about 1%. the company stock seesawing below $600 for the first time since july 30th. more on the drama sparked by apple's latest earnings report next. stay with us. you know, because you been,
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maybe new buildings? what about updated equipment? they can help, but recent research shows... ... nothing transforms schools like investing in advanced teacher education. let's build a strong foundation. let's invest in our teachers so they can inspire our students. let's solve this. welcome back. we are watching apple trade down today. although it's off the lows. want to get to bob pisani, take a look at the impact apple will have on the wider broader market. bob. >> you want to look at the s&p futures, maria. we went out at a 1408 at the
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close and when apple's numbers came out we dropped below 1400 for a brief period. you see that on the far right. that caused a little bit of panic. that's a big important level. when you go below 1,400 it triggers some stop orders. but you can see it's come back now and over 1,403. this suggests at least very early that the damage will be somewhat limited from apple. hold it below 1,400 would be very bad news at this point. above that indications that perhaps maybe 1% or so in the overall markets. maria, back to you. >> bob, thank you so much. before we go, take a look at apple once more. as we see this stock has actually reversed course and is now at break even. it was just positive moments ago. so all bets are out in terms of what this does to the market tomorrow because it certainly is well off of the lows hit right after that knee-jerk reaction of the earning numbers out. the stock as you can see there at 608.80. the market tonight up on the session, although we did get a pretty good move upwards in the final hour of trading because we were flat for much of the day.


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